The PMI for manufacturing last month was 45 points, the same as in May this year, S&P Global reported. As the authors of the study added, “the Polish industrial sector shrank for the twenty-sixth month in a row, which is the longest sequence since the study began in 1998.”
The PMI index is a leading indicator. Its task is to forecast the future state of industry or services before real data, e.g. on industrial production or retail sales, hits the market.
“According to the latest PMI data published by S&P Global, the Polish industrial sector remained in a slowdown phase at the halfway point of 2024. The sector contracted for the twenty-sixth month in a row, which is the longest sequence since the survey began in 1998. There were further sharp declines in production volumes, the number of new orders, exports and employment, while purchasing activity decreased for a record twenty-fifth month in a row,” it was written in the commentary to the study.
The authors of the study report that weak demand was accompanied by a lack of inflationary pressure – both the purchase prices of production inputs and product prices have fallen slightly since May.
The study found that the faster decline in production volumes was offset by slower declines in new orders, employment and input inventories, as well as a less noticeable reduction in supplier lead times.
“Demand for Polish industrial products continued to weaken in June. The number of new orders decreased for the twenty-eighth month in a row, representing the longest decline on record, and the pace of decline, although slower than in May, remained rapid. Export sales also declined for a record twenty-eighth consecutive month, with Germany being the key source of weakness.
Demand for Polish goods continues to fall
The Polish Economic Institute (PIE) noted in its commentary that weak results are visible in almost all components. It added that the index in June was slightly above market forecasts, amounting to 44.9 points, and for over two years the indicator has remained below the level of 50 points. In the opinion of the institute's analysts, the expected improvement in activity in industry this year is also to support positive PMI readings.
As added, the Central Statistical Office's general economic climate indicator also recorded a slight decline in June, especially among large enterprises. “Compared to previous months the situation has worsened in almost all categoriesthe deepest decline is visible in the current order portfolio and in relation to the forecasts of the future economic situation of enterprises,” it was noted.
The survey results also indicate that business still complains about a shortage of qualified workers and employment costs. In the coming months, the PMI index will most likely remain below the 50-point line, PIE economists predict.
“A very deep drop in prices in industry suggests that nominal revenues of industrial companies are strongly negative. However, the expected improvement in activity in industry is expected to have a positive impact on business sentiment. Focus Economics forecasts indicate that in 2024, industrial production is expected to increase by 2.9%. y/y. At the same time, better economic results among Poland's largest partners will improve the foreign order portfolio,” PIE concluded.
Employment reduction in industry
PKO BP experts pointed out that: employment in the processing industry has been decreasing for 25 monthshowever, the pace of reduction has slowed down slightly compared to May.
“The employment reduction was a consequence not only of poor production, which forced a reduction in the number of full-time positions, but also – as indicated in the commentary – resulted from employees retiring and changing jobs in conditions of higher wage demands (i.e. reasons attributable to employees). It is This is consistent with the Central Statistical Office data showing a reduction in employment in industry (in the enterprise sector) with a relatively stable unemployment rate,” we read in the PKO BP comment.
According to the bank's economists, a positive signal visible in the PMI data for manufacturing is the further weakening of inflationary pressure. They noted that the average cost of production factors and the prices of finished products continued to fall, although somewhat slower than in May.
PMI Index – Experts' Comments
“Nothing good is in store for the Polish industry in 2024. In June, the PMI index was only 45 points. For over two years, the PMI index has remained below 50 points, which means long-term stagnation in the industry,” she wrote. Confederation Leviathan on Portal X.
Peako analysts also commented on the latest PMI data, announcing further deterioration of the situation in the Polish industry.
“Weak economic conditions in the industry continue. In June, the PMI remained at the previous month's level of 45.0 points, the lowest in 7 months. What in detail means: a further sharp decline in the number of new orders, employment reduction and low inflation pressure,” we read in the comment of Analyze Pekao on the X portal.
As ING Economics Poland adds, “what is also noteworthy is the fastest decline in production volume in eight months, as well as further new orders.”
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